Until then, though, the $26 million fund is waiting to pounce, as it has been since it launched in 1993.

“I’ve been consistently wrong on when the embargo would be lifted,” he said while sitting in his office on South Beach. “But it’s going to happen.” Mr. Herzfeld owns about $1.2 million in shares of the fund.

Some investors are starting to prepare for the day when the U.S. resumes trade with Cuba. The Obama administration has loosened travel restrictions, and the Cuban government has approved economic overhauls. But for investors, Cuba remains elusive.

“This is an investment theme that’s way out of favor,” said Stuart Frankel, founder of New York brokerage firm Stuart Frankel & Co. Inc., who said he bought shares in Herzfeld Caribbean Basin after a trip to Cuba a few years ago. Still, “you’ve got to be wrong first before you’re right,” Mr. Frankel said.

On Monday, Pope Benedict XVI, who opposes the trade embargo, begins a three-day visit to Cuba, the first for a Catholic pope since 1998. The fund’s investors hope the attention will help hasten the embargo’s end, even though similar hopes have been dashed over the years.

Mr. Herzfeld is mostly known among investors as a closed-end fund specialist and the publisher of a monthly research report called the Investor’s Guide to Closed-End Funds. Closed-end funds trade on exchanges and can change hands at prices far above or below the value of their underlying assets.

Herzfeld Caribbean Basin is up 10% this year, roughly in line with the overall U.S. stock market. In the past decade, the fund posted an average annual return of 9.9%, far above the Standard & Poor’s 500-stock index average annual return of 4%.

He doesn’t flout the U.S. embargo or try to tiptoe around it. Instead, the fund’s portfolio is packed with companies Mr. Herzfeld thinks would be ready to swoop in if curbs are lifted.

For example, Carnival Corp. will establish ports of call in Cuba after the embargo ends, he predicts. About 5% of the fund’s assets are invested in shares of the cruise operator. Herzfeld Caribbean Basin also holds food producer and cargo-ship operator Seaboard Corp. which could become a major shipper to Cuba, he said. Watsco Inc. an air-conditioning-equipment distributor, would modernize Cuba’s cooling systems, he predicts.

Some of the fund’s securities look more like collectors’ items. Herzfeld Caribbean Basin owns 700 shares of Cuban Electric Co., which has no assets other than some cash and a 50-year-old, $270 million claim (plus interest) against the Castro government for confiscating its power plants. Mr. Herzfeld said he bought all the shares he could find in 2005. He thinks Cuba will try to settle confiscation claims if the embargo is lifted. If the government settled at least the initial judgment, he said, the fund would make about $74 for each share. The fund’s board said the trade embargo restricts it from selling the shares. So, it values them at zero.

Herzfeld Caribbean Basin also owns some bonds: pre-Castro Republic of Cuba issues that would have matured in 1977 had the Cuban government not defaulted on them in the 1960s. In 1995, Mr. Herzfeld’s fund snapped up $165,000 in face value of the bonds for $63,038. Later, the New York Stock Exchange halted their trading, forcing the fund to value the bonds at zero.

Other holdings include shares of publicly traded Fuego Entertainment Co., which runs music tours with Cuban artists, and Cuba Business Development Group, a private company that owns part of a telecommunications firm with business in Cuba. Both companies fall under exceptions to the U.S. embargo or have licenses that allow some entertainment and telecom companies to do limited business with Cuba.

When Cuba makes headlines, such as on rumors of Mr. Castro’s death, the share price of Mr. Herzfeld’s fund usually jumps. It falls below its net asset value when sentiment darkens. That happened after Cuba shot down a plane flown by an exile organization in 1996.

There is no doubt Mr Herzfeld is right—Cuba will become a boomtown after Fidel dies and Raul starts the process of loosening the suffocating grip of the failed economic policies.

There will be a land-rush. At some point, the displaced landowners, like the Bacardi family, will recover their properties. Many other families living in Florida and elsewhere in the US will recover their properties, much like those who reasserted their ownership of confiscated properties in East Germany.

The securities in the Herzfeld fund will see their values soar, and Cubans themselves will begin to enjoy rising prosperity for the first time. Of course, some of Cuba’s gains will come from opportunities lost by other Caribbean islands.

Undoubtedly Cuba will become a hotspot for collegiate spring breaks, and there’s no doubt it’s one place in the region that can develop an ethanol economy based on its sugar crop. Maybe a major-league baseball team located in Havana will come into existence.

Perhaps a fishing industry will also develop. As it is, the Castros do not permit anyone to leave shore in a vessel capable of powering itself to Florida. And, possibly, for the first time, when oil & gas companies are willing to sign contracts with the Cuban government, offshore drilling in Cuban waters will become common and Cuba will develop a supply of oil and gas that can keep its buses operating and the lights on 24 hours a day.

KEMAL CABUK Replied:

There are three things communism is not particularly good at: (1) efficient allocation of resources; (2) creating wealth seemingly out of thin air; and (3) satiating human greed.

If anything, Cuba has done quite well despite the embargo and the self-imposed restrictions (e.g. on boats, telecommunications, etc.) that the Cuban government needs in order to maintain its hold on power. The very fact that the Castro regime still exists after all these decades is a testament to the viability of the communist system. But now that the vultures are circling overhead it might be a good idea to join them.

Christopher Bischof Replied:

Kemal,

The Castro regime has been able to hold on to power because the US has made it an easy job.

No matter what the Castro regime does, outside the ongoing embargo, the US sits still. In fact, the US allows Cuban-Americans to remit money to family members stuck on the island prison. Meanwhile, Cuba does conduct some trade with the US, as a CNBC special will show on Monday night. Moreover, Cuba is generously supported by Venezuela and it has extensive relations with Canada and Spain.

However, the most obvious example of Cuba’s economic/technical incompetence is the fact that it cannot find a drop of oil or a whiff of gas in the Gulf of Mexico, from which the US extracts vast quantities of both.

On top of that embarrassment is the fact that Cuba could supply much of its transportation fuel by turning its sugar crop into ethanol. Oops. Another area of technical/economic/political incompetence.

And despite the extraordinary sport fishing around Cuba, there’s no fishing industry to feed the Cubans. As with all dictatorships, the Castro regime spends much of its revenue on activities that keep it in power while spending nothing to better the lives of Cubans. If the island were a capitalist democracy, it would undoubtedly be the most prosperous—per-capita—of all the Central and South American nations.

Jeff Konves Replied:

Regarding your statement “the very fact that the Castro regime still exists after all these decades is a testament to the viability of the communist system” - what on earth kind of “viability” can you possibly be talking about? We have been witnessing the demise of the communist philosophy for some time now - have you been asleep on your ash heap of history?. The fact that some people like Chavez, Castro, and the party leaders in China still practice this vile form of human enslavement means the world still has a way to go to get rid of it. The “vultures” you talk about are business people/wealth creators that can help to liberate the inmates of the world’s largest island prison once the “warden” dies.

David Peterson Replied:

Not just Cuba. When the walls come down, South Florida will get a huge economic boost. Also Puerto Rico.

Daniel Walker Wrote:

I think the embargo helps maintain the Castros hold on power. I think it’s morally wrong to withhold trading opportunities from Cubans, therefore helping the Castros keep the people poor and denying them the resources needed to fight back. The US is the country that is morally in the wrong. Lift the trade embargo and watch the Castros hold on power vanish into thin air.

The trade embargo is like West Germany building the wall to keep the East Germans out. We would’ve all considered that morally wrong.

John Laferrriere Wrote:

Yes, I’m sure that telecom companies will rush to get a share of these folks’ $30/wk incomes to they can text each other about how poor they are.

I’m also sure the closed-end fund will make some people a lot of money initially and will be sold to the losers a few months after “Cuba’s big IPO” where reality will set in.

There really may be no there there except another source for US cheap labor.